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Jul 19

A Beginner’s Guide To Investing In Cryptocurrency

Reading Time: 4 mins

Over the past decade, cryptocurrency has become a buzzword in the digital markets. Tech-savvy investors have been hoarding crypto to predict trends while making massive gains. However, crypto remains an unknown and vague concept for an ordinary person. While many understand the technology that powers cryptocurrency, only a few know how to buy and sell. Let us show you the ropes if you are in the same boat.  

Cryptocurrency is a virtual currency that people can buy and sell online. Like stocks, it is more like a digital asset that gains and loses its value. Another thing that distinguishes crypto from the standard currency is decentralization. Like the Federal Reserve manages the national currency, no central authority governs crypto. Thus, cryptocurrency has no oversight, exposing it to more volatility in the market.  

Even though crypto can be unpredictable, the currency is maintained by a blockchain system. It tracks all units of crypto and their owners while managing security. In addition, it also determines when to create new crypto units, bridging the supply and demand gaps. If you are eager to learn about the crypto world, keep reading. Here is a beginner’s guide to investing in cryptocurrency.  

How to invest in crypto?

The first question that hits the mind is how do people purchase crypto? Of course, you can shop online depending on the type of crypto coin you want. For example, if you want to buy Bitcoin, get in touch with a broker or use your card to purchase. Similarly, you can buy Ethereum with credit card on any reliable exchange forum. Let us help you understand this step by step; look below.  

1. Choose an exchange

An exchange is where you will buy, sell, and store your cryptocurrency. Hence, you must find a reputable exchange with top-notch security protocols to avoid technical glitches. In addition, you have to ensure the exchange is user-friendly to ensure you can conduct transactions without any trouble. Here are three of the best exchanges for beginners.  

  • Currency.com is an excellent forum for beginners. It has a simple, intelligent, and powerful interface, allowing users to shop easily. Above all, it offers competitive pricing with a feature to make cross-crypto exchanges. Thus, if you have purchased bitcoins, you can get them exchanged with Ethereum without converting them into USD first.  
  • Binance.US attracts investors by offering low fees and a better selection of cryptocurrencies. Also, the forum has more advanced features, letting users test and experiment with different coins. However, this forum is under high regulatory scrutiny, which can be a deal-breaker for many investors.  
  • Coinbase is a product of a publicly-traded company that offers an intuitive UI design. It also allows users to earn fee crypto coins through its learning feature, but all these features come with a hefty fee.  

 2. Select your coins 

For many, Bitcoin is the only digital currency, but that’s not true. Today, there are more than 7,500 cryptocurrencies in existence. Therefore, you must select the most viable and legitimate coins to gain maximum returns. Here is a list of five top-performing coins.  

  • Bitcoin (BTC): It is widely known as the king of cryptos, available on every exchange forum.  
  • Ethereum (ETH): It is another famous coin by market cap. Over time, this coin has become successful through the innovation of recording intelligent contracts to the blockchain.  
  • Dogecoin (DOGE): Dogecoin has reached an $85 billion market cap because of speculation and internet chatter. Simply put, it can be an incredible investment option.  
  • Litecoin (LTC): Litecoin is an open-source payment network with faster transaction times than bitcoin. In addition, it has a coin limit of $84 million, whereas bitcoin has a cap of $21 million.  
  • Zcash (ZEC): Zcash is built on the Bitcoin code base but has put more emphasis on privacy. You can send Zcash without disclosing the sender, receiver, or amount.  

 

3. Maintain your investment

Once you have invested in crypto, the final step is maintaining that investment. For this, you must closely monitor your investment, i.e., the trends in crypto markets. Perhaps, you can add crypto to the main dashboard to monitor performance over time. Likewise, check headlines regularly to keep tabs on the regulatory scrutiny of your chosen exchange. If your exchange is in hot water or regulations are tightening, immediately switch to another exchange.  

Remember, the closure of exchange can be destructive for the investors as they tend to lose all their money. Lastly, you have to immerse yourself in crypto communities. For that, you can visit the crypto subreddit to view trends and topics related to crypto. Likewise, monitor which governments are banning cryptos and imposing regulations. Educating yourself about crypto markets will go a long way in ensuring your investment is secure and not loss-bearing.  

How does crypto work?

Most people wonder what factors determine the cryptocurrency’s price. Generally, market dynamics and conditions determine the value of the currency. But since no physical asset is tied to crypto, its value is dependent on whether people want to buy currency or not. If lots of people are buying crypto, the value will increase. Similarly, the market will crash when investors lose interest.  

Besides this, crypto’s value also skyrockets when an influencer or celebrity talks about crypto. Lately, Elon Musk tweeted about adding crypto as a payment mode, and the prices of coins spiked. It might seem like a head-scratching concept, but that is how crypto markets work. Therefore, take advantage of marketplace surges to yield profitable returns from crypto.  

Further, below we have listed a few essential things one should know before investing in cryptocurrency.  

  • Capital gains tax: As cryptocurrency is widely recognized as a digital asset, it is subject to taxation. For all the profit made on crypto, you have to pay capital gains tax 
  • Short-term investments: Because of the volatility of crypto markets, crypto is best suited for short-term investment. If you have plans to invest money in the long-term, explore other investment options.  

Conclusion

Believe it or not, crypto is the future of the digital world. Many brands have already started accepting payments via cryptocurrency, and soon, others will jump on this bandwagon. Hence, now is the time to start investing in crypto. It might seem foreign initially, but once you get used to the market trends, it can yield incredible returns. Hence, start self-educating, keep an eye on the industry, and learn about the best practices of investing in crypto. 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. 

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